Finance Articles

Planning Your First Home Mortgage

It isn?t a simple task to buy your home on a mortgage, especially so if it is your first home. Homebuyers find it very intimidating to take over such a huge responsibility, and that too spanning over so many years. To add to the problem, the language and terminology used by the mortgage lenders, realtors and title companies is nothing short of an alien tongue to the first time mortgage buyer. All this taken together makes buying your home on a mortgage quite a scary proposition.

But nothing is easier than a mortgage if you have all your preparations in place, all that frightful jargon notwithstanding. This article puts forward those fundamental things you need to be armed with before contemplating your first mortgage.

Affordability is the chief factor. You must remember that at the end of the day you will be repaying the mortgage out of your monthly income. So this will require a basic calculation at your end about how much you will be able to shell out on the monthly repayment. There is a way to get a rough estimate on this. Calculate your annual gross income. Multiply this figure by three. Generally, this is the amount which you can afford for your house. Do not stretch your mortgage beyond this figure. If you are doing so, you must be positive that your financial gains will increase within a couple of years. You could use a mortgage calculator (freely available online) to compute what the monthly payments on the mortgage would be. If it still seems complicated, there are mortgage bankers who could help go ahead with the process.

The next step would be to hunt for the house of your desires, which would also fit within the budget you have made! You might have to meet several realtors and scour the property classifieds of the newspapers. Once you have zeroed in on a house, then it is time to begin the talks for the mortgage. Again here, preparedness is the key to have a smooth mortgage processing experience. You will need to have several documents when you are meeting the lenders. It is wise to keep them ready beforehand so that you do not waste much time later. Most lenders would want information about your employment and income, tax returns, investments on shares and interests and all other sources of money for the last two years at least. Lenders would also want to see how you are managing your bank accounts; so keep all your check books ready and updated. Statements from stocks, bonds, life insurance policies and retirement funds would also be needed. Finally keep all documents pertaining to your fixed assets ready, and also information about any other form of credit you have availed of.

Mortgage buyers are often too preoccupied with their mortgage proceedings that they do not give much thought to the different types of mortgages that prevail in the market. Decide whether you would like to go ahead with a fixed rate or an adjustable rate loan. Make this decision on the basis of your current financial position and its potential of growing in the future. There are several tools on the internet to help you with your decisions. You would also need to take into consideration for how long you plan to live in the home.

The government is helping first time homebuyers by providing the Federal Housing Administration loans. These loans provide a very low down payment and have much more attractive rules for the first time homebuyers. FHA loans are available with almost all mortgage lenders.

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